Thursday, July 5, 2012

Stellar Diamonds kicks off Tongo drill programme to double resources

Stellar shares edged four per cent higher this morning as it kicked off an
important new drill programme at the Tongo project in eastern Sierra
Leone.
The programme aims to double Tongo’s diamond resource, which
currently stands at 660,000 carats at a grade of 120 carats per hundred
tonnes.
It will also lay the foundations for a pre-feasibility study on the project.
"We are firmly focused on significantly expanding the resource at
Tongo, which has shown exciting potential to date,” said chief executive
Karl Smithson.
Stellar plans to drill 10 extension holes, for a total of 3,000
metres. This drilling will take place on the undrilled 0.6 kilometre
section of the 2.5 kilometre long Dyke 1, and it will examine the
resource to a depth of 300 metres.
The results are expected towards the end of this year.
"This drilling and evaluation programme is designed to double Tongo's
existing inferred diamond resource to over 1.2 million carats,” said
chief executive Karl Smithson.
“The previously announced resource has a grade of 120cpht and a
modelled diamond value of between $225 and $270 per carat, demonstrating
the strength on Tongo within the Stellar portfolio."
Smithson adds: ““At current grades and diamond values, the in-situ
value of the Dyke 1 kimberlite is estimated by the company to be almost
$300 per tonne, making it potentially one of the highest known value per
tonne kimberlites globally.
“We expect the completion of drilling and upgrade of the resource
statement during the fourth quarter of this year and I look forward to
updating shareholders as we progress."
Following the completion of the drill programme and the subsequent
feasibility study Stellar’s next step will be an underground mining
trial.
The scope of the new programme has prompted an upgrade from Northland
Capital analyst Ryan Long, who previously had a more conservative view
on the potential resource expansion.
The analyst has now upped his target price to 10.2p from 7.9p.
He says, in a note, that he had expected the 0.6 kilometre section to
yield an extra resource of around 200,000 carats, and he thought the
dyke’s depth would be just 200 metres.
Also, Long highlights two issues that have somewhat overshadowed Stellar’s clear progress on the ground.
Importantly he points out that the short term weaknesses in the rough diamond market do not affect his valuation of Stellar.